Need to Know: The U.S. stock market rally has legs – investors should stay in, strategist says
U.S. stocks fell on Monday after two consecutive weeks of gains. The three major indexes have rallied on the prospect of the U.S. economy gradually reopening, despite the country’s death toll continuing to rise. The figure now stands at more than 40,000. The Dow Jones Industrial Average DJIA,
fell 592 points – 2.4% – on Monday.
However, in our call of the day, Nordea Asset Management’s Sébastien Galy said the rally had legs.
“Equity markets seem to be rallying against common decency. This should be seen as a sign of the Fed’s and to a lesser extent the government’s success, redistributing wealth is a political decision,” the senior macro strategist said in a note.
“Short selling reaching new highs on the S&P 500 (as reported by Wall Street Journal) is a sure sign that this rally has some legs to it,” he added. The problem would hit when the rally overshoots earlier than the economy recovers without any additional regulation on the nonfinancial sector, he said.
“You take emergency measures that are very aggressive but then make sure we don’t skip into the next one, much as [with] higher house prices you simply borrow gains from the future to today as investors are forced into the long term. That means better stay in this rally as long-term returns should be moderate,” Galy said.
This chart from UBS shows how Chinese consumers have changed their spending habits as a result of the coronavirus outbreak. About 25% of people have increased their online shopping and home online entertainment spend by more than 50%, while dining out and outdoor entertainment have taken a hit.
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